So what you need is:
*Photoshop,or some similar editing software
*FaceGen software found here:
http://www.facegen.com/index.htm
Also your files must be unpacked.Portraits are found in data/ui/[culture]/portraits.
So let's start.
1) We will make face first in FaceGen.I suggest clicking on "Generate" option,which will make random face.So let's take look at these things I pointed out.
On red rectangle you can see all stuff for look:Will your character be male or female,young or old,ugly or attractive.It's all up to you!
Blue rectangle shows skin options.Here you choose which race will your character be.
2) Now,we will work on character's appearance.On "shape","colour" and "tween" tabs,you can make really specific character."Shape" tab is used for general face part,like length of the nose,or face wideness.You choose colours of face at "colour" tab."Tween" is used for character emotions.You can choose angry or happy face,but you can also combine them.
3) When you have made completely your character you should go to "View" tab and change background colour,so you can make it transparent more easily.
4) In your ui folder find portraits.Open one of them in Photoshop.I opened file called "096" in my "D:\Games\Total War\Medieval II Total War\data\ui\southern_european\portraits\portraits\young\generals" folder.It's a picture of general looking right in front of him.So it's a good thing that our general is looking in that direction.You should always try to adjust general's angle with your character's angle,if you use their original clothes.Now,go and save your picture on File->Save image in FaceGen,and put it where you want.I suggest using Targa format.
Then open it in Photoshop.
5) Make transparent image sized 400 x 400 pixels,and copy your general's picture.Delete your background and use clone tool to remove "SI" on his forehead.
6) Now playing is everything.You must find exact size of your picture.Put it on original file,and just remove head from layer above,and there you go.Perfect match!
Some more tips:
Unfortunately,you must have "Customizer" if you want to make hair(only short,black hair is possible here),but if you are Photoshop expert,you can make hair by yourself!
On tab called "Genetic" you will easily get pictures of people that look like your character.So,you will get easily pictures of his sons and daughters.
Every Generals portrait has it's old and young file.You can use just a little change in RED RECTANGLE in Picture 1.
If you have a question,just ask.
Hope I helped,The Spartan Warlord